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The Short Answer

How Are Annuity Payments Taxed?

Uncle Sam's cut depends on the type of annuity as well as how and when you receive payments.

Question: I purchased an annuity several years ago, and I'd like to start receiving payments from it. How can I figure out what the tax treatment will be?

Answer: The key first step in answering this question is to determine what type of annuity you have. If you purchased the annuity through your employer, it's a good bet that it's a qualified annuity. But if you bought the annuity on your own, it's probably a nonqualified annuity.